America is stuck at home, but food-delivery companies still struggle to profit
wsj.com
wsj.com
Food delivery is hardly a new idea. By basically just having VC’s pay for everyone’s food delivery you can create this great market and app ecosystem that people use. Is this a remotely sustainable business model that could stand on its own? That appears very unlikely at scale.
Hyper-local collaboration between restaurants in delivery that kicks out the app company “middle man” could become a thing. I’ve already seen this sort of thing work well in local markets that basically out-competed Uber etc by just getting their act together and hiring a few developers to build a basic app.
The grocery store is not designed for the level of efficiency a system like this needs. It's designed to make you walk from one end of the store to the other slowly looking at all the products to gather each individual item on your list. It's great for marketing but terrible for efficiency and for social distancing. As long as the delivery and pickup is done from the same stock the grocery shoppers pick from it'll never be as reliable as just going in yourself.
Obviously, having someone go to a store just for your purchase and walk along all the isles to pick stuff up is horrendously inefficient.
It's obviously inefficient to send someone to a store to grab stuff, but "giant room with products on shelves" is a pretty efficient setup. They can do some of it in the back room, or a warehouse full of pallets, but to a large extent companies end up building "dark stores" that are almost the same as a normal store, but with no customers allowed in.
But the essential difference is the "push vs pull" - instead of one delivery pulling items from everywhere (which is a new process that grocery chains did not have) you have the supply process pushing items to many delivery targets, which is a process that grocery chains already have and have optimized.
Instacart had early advantage because full scale grocery delivery infrastructure was broadly in its infancy but if and when the likes of Amazon, Wal-Mart and others go full scale on their own offerings then structurally it would seem impossible for Instacart to compete with that.
Amazon Fresh might be a real competitor but it seems like they're running into the same problems as grocery stores.
I agree completely. I signed up to be a shopper with Instacart, and the experience was awful. To get work, there was a 'first come, first serve' queue I had to check at a specific time several times a week. Not great, I thought, but okay, we'll see how it goes.
Well, apparently people had set up bots or something, because all the orders worth taking were scooped up in less than a minute when the appointed time arrived. I couldn't even read the screen fast enough to see what was there before it was gone. I walked away in disgust immediately and never considered working with them again.
I am curious why Shopify doesn't lateral into this market. They already have the majority of the infrastructure for retail.
But please, let us never use 'lateral' as a verb ever again.
Maybe my urban area is different but restaurants here are doing 10+ orders per hour across all delivery channels. The bottleneck becomes the # of delivery couriers available and smartly assigning them to deliveries.
This is the optimal way.
Subsidized not only by VCs, but also by gig economy workers who genuinely don’t understand how little they’re being paid because their liabilities are complicated and often hidden/deferred.
This seems to happen a lot especially with food service startups, because of how price-sensitive that market is. Selling anything below cost or undercutting the competition by even a little bit in that industry will give you exponential growth for as long as you can sustain it, but the instant you want to turn a profit the market will turn their back on you and go somewhere else.
In some countries it is even illegal.
Can you explain why this should not be viewed as anti-competitive behavior? How would you call it if it's not predatory pricing/undercutting?
1. above the competition - gouging, profiteering
2. below the competition - predatory pricing, unfair competition, dumping
3. same as the competition - price fixing, collusion
All are illegal!
- if a market player wants to sell goods or services at a loss, let them do it and it benefits the consumer
- if the competition goes out of business and the prices are raised, somebody else will see the opportunity to enter the market at a lower cost.
Rinse and repeat. The consumers benefit from it either way.
Comparison: when a new restaurant opens, it's very common to hand out coupons in the neighborhood for discounts or free meals. Those free meals will be sold at a loss, with the goal of building a customer base. Think of it as marketing.
EOD, "anti-competitive" is evaluated on the outcome -- does the success of the company running the discounts make the market more or less competitive if they succeed? If a company is already the dominant player in a market, it's anti-competitive to price dump to keep new entrants out.
But if the company is new and trying to disrupt established players (or trying to create a market where one didn't exist), it's very hard to argue that there's less competition due to their success.
This doesn't seem right. If they are price dumping then it will immediately affect the competition. No need to wait for an outcome or interpretation.
> Comparison: when a new restaurant opens, it's very common to hand out coupons in the neighborhood for discounts or free meals.
I'd say this is only acceptable because it is small scale (only few restaurants fit in a neighborhood) and the amount of money isn't endless like it (often) is with VC money. The short duration makes it possible for the competition to overcome the negative effects.
The problem with VC money is that all too often it is used to destroy competition and build monopolies.
Case history, please.
So, it's commonplace but no case histories.
Microsoft - not a VC funded company. NFL - government sanctioned monopoly, also not a VC funded company
Now, as to OS/2, people say "poor IBM", but IBM was the monopolist boogeyman in the 70's and 80's. BEOS simply wasn't good enough. Apple OS's and Linux did and continue to do quite well.
The DOJ went after Microsoft for giving away Explorer for free, which is what every browser maker does now, and has for 20 years. How that's bad for consumers I have no idea. As for Netscape, I switched from Netscape to Explorer because Netscape crashed constantly. That was hardly anti-competitive behavior on Microsoft's part, it was bad engineering on Netscape's.
Yes, I know IE crashed too, but nowhere near as often as Netscape.
I also give away the Digital Mars C and C++ compilers, the D compiler, and the source code to all of it. Is that anti-competitive too? How about all the other free software I use every day? Should the DOJ go after their creators, too?
This unpaid and untaxed emotional labor has to stop!
We need rules and regulations for society to work!
they are taking the risk of offering free services in the hope that you will stay around and keep using the service. if you dont, they are at a loss.
Purposefully creating price wars by undercutting competitors is a different story.
But selling below total cost can just be a way to get infrastructure in place before market share is in place (if it ever does happen).
Pizza delivery drivers have been getting the same bad deal for a long time. Most teenagers/young adults who take a delivery job have no idea that they require additional coverage on their vehicle and are one accident away from a lot of financial hardship.
You just see/hear about it much more now because rather than a small business offering the bad deal it's a (multi)national company. VC is just providing a way to scale the pain's visibility up.
With these services, it's like as though people somehow expect gig-work - already much less certain than being an employed drivers - to be a career. License and insurance requirements, PPE, and the sheer scale of the middleman operation involved in running a huge app like this - it's nuts to think that it could be done for the same price as the conventional delivery model.
Sure... until an accident happens, you find out that your insurance didn't cover the (undeclared) use for business purposes, and you're liable for somebody's million-dollar medical bills.
I'd bet money that the insurance company is still on the hook to cover it, but they'll be super quick to drop you.
Not so sure about someone getting saddled with someone elses medical bills.
Just don’t drink and drive.
Gas was $1/gallon and we got 70¢ per delivery. I asked a friend about 2008 or so, when gas had gotten up to almost $5/gallon briefly (part of the cause of the Great Recession, I'd imagine), and he said they were still getting 70¢ per run. That sucks.
Also, only 1/10 orders used credit cards, so nobody paid taxes on tips - all cash. By 2008, I'm guessing it was 1/3 using credit, and now, with apps, it's probably 9/10 using cards.
But yeah, it was a sweet gig if you weren't the social / beautiful type to be a successful waiter or waitress / bartender. It paid more and was way more fun than making $6-$8 / hour at McDonalds or Target.
Ehh, I had a bachelor's degree and did tech support for a fortune 500 company, and I was earning half what my friend made as a pizza delivery driver.
s/Pizza delivery drivers/everyone
After talking to several gig economy workers, and many of them understand in very concrete terms that they are trading the value their vehicle for cash now. It's a logical short-term choice when they have bills that need to be paid today, and have a vehicle they can stretch out for a few years.
Not only that, but honestly, most taxi companies, at least in my area, will go pick up food, liquor or other things and make deliveries. There's also a couple local delivery services that specialize in just that.
They've been doing well here during the lockdown, especially with liquor deliveries, or so i've heard. Things like uber and just eat aren't really that popular or used here though. Just the few chain restaurants use them.
Food delivery is not new. The new thing are the web interfaces. Now people don't need to visit shops to learn about new things. People can shop delivered goods all the time. This allows to drive down delivery costs with scale.
Additionally, online shops streamline the ordering process. No person is needed to note down orders.
Additionally, self-driving cars and robots will eliminate the cost of the last mile. Like Uber, whoever owns the market when the robots will go life will rake in huge profits.
For large parts over here in Germany I don't see route sharing in food delivery as well. Some delivery drivers I can observe via GPS (could be faked, but looks plausible) and many are delivering via bike (Pedelec etc.) or scooter and have limited space to transport also when observing restaurants they often pass a single order ober as well.
This of course can be different in areas with other order frequency and other amount of restaurants offering delivery and other distances. (Don't think many orders go further than 2km here)
As for food delivery robots, I mean, sure, but building a business that only succeeds if other people deliver world-changing technology at scale before you run out of capital seems a wee bit on the risky side.
Right, that's my thinking (and anyone is free to steal this idea with my encouragement): there should be a way for someone to commit to some dish, started at some time, and then others can "hook" onto the order for a discount. Then you get economies of scale: it costs a lot less than O(n) to batch it up to n orders.
That's a surplus that can be shared between the tech platform, the restaurant, and the end user.
Similar logic for delivering that same food to people who are close to each other.
Earlier post on the model:
This is how Uber Eats already works in Toronto.
There is a section in the app with restaurants that have orders already in progress and with a timer on each one and if you order within that limited time, the delivery fee is $0.
Time is generally cheap outside of cities, and capital less so, so I think most big SDC companies are targeting cities.
Local approaches can work and be sustainable, but they have to be able to charge a price that actually makes sense for the delivery. Right now that simply isn't possible because the VC-funded behemoths are capable of undercutting anything that moves in the space and attempts to be cash-flow positive in any sort of sustainable way.
If you had an app that only served, say, NYC, you can reduce burn drastically, not worry about scale issues too much, and run a business that's profitable without screwing over either the restaurant or the delivery person.
This is absolutely a problem that can and should be solved at a local level. As a consumer, you gain nothing by using an app that serves 100+ cities.
Also people definitely get food delivered while on vacation or traveling for work. Probably even more often than they do at home since they don’t have access to a kitchen to cook in.
Service delivered directly to your hotel room door is typically offered by the hotel exclusively.
I know some people who just provides the gate code in the delivery instructions that UPS and FedEx uses to open the gate. This is becoming more necessary in my experience because of Amazon using gig workers for delivery.
Hasn't been an issue.
But then, I know a lot of people who do room service and I haven't in literally decades.
The other 10% of the time, my flight got delayed and I arrived at my hotel at midnight. I want nothing more than to eat something quick and simple, and get to sleep. That's where room service or a food delivery app comes in, and at a lot of hotels the room service after midnight is a lot worse than a delivery app.
I'm also not really sure what advantages there are to having 100+ local apps as opposed to a few national ones, there genuinely is a lot of infrastructure involved, and it's easier to push back against bad behavior on large companies (e.g. when PostMates was pocketing their drivers' tips.)
uber eats works in a lot of countries. i've ordered food using it on south america, north america and europe all on the same account with the same experience.
how would apple and google get a 30% commission off a web-app?! you must create an app!
There's an massive ecosystem built around the current model and a lot of money that can be siphoned off. Just take a look at the AdTech space
>Probe finds middlemen siphon off half of online advertising spend
https://www.theregister.co.uk/2020/05/07/ad_tech_fees_sucked...
The VC model is like a lot of models. They're aiming for the section of consumers that will give them a 25% cut for picture-delivery to the door.
The opposite scaling model is a truck that delivers soup and vegetables from a central production facility to every house on a street once a week on a schedule flexible enough to keep costs low.
The restaurant model has been selling prepared food at a premium in exchange for the experience (not that they don't have ultra-low margins but they are automatically following a model that doesn't scale).
but then I remembered how many of the scooter offerings have already disappeared
these food delivery courier services can disappear just as quick, to be replaced by smaller local networks and restuarant specific services just like they used to be
There were difficulties ordering over the phone sometimes. People would mishear you. They would be overwhelmed with orders at busy times. A few places had online ordering directly, mitigating these issues.
But some of the most interesting aspects in contrast to the apps is how they charged for delivery. It was common for, say, a pizza place to hire their own driver. But, and maybe this only works in cities, I ordered from some people who seemed to contract out. It seemed like some of those people were making it ok as a standalone business, though you wouldn't necessarily know that the restaurant wasn't employing them directly or that they did deliveries for multiple places.
A lot of places seemed to eat some of the cost of delivery but not raise the menu prices. So they would only let you deliver above a minimum price or order size. And of course you were expected to tip the driver.
But these apps take a hefty fee on top of the posted price, and they have a charge that goes to the courier, and you can tip above that. It seems like added consumer costs are higher than with the old way.
And we remove all the delivery driver handling crap. Let the restaurant handle that. Sounds like a plan to me.
Not saying the end result has to look like uber eats, etc, but there do seem to be efficiencies from having X drivers collectively cover Y restaurants, with X << Y
1.) accessing a local directory of restaurants with their menus
2.) accessing a common user interface experience for ordering
3.) not having to enter credit card info
4.) common portal to receive updates from the restaurant on the delivery
The actual dispatch of the driver and hiring of the driver is not a key component of the user experience and could easily be handled by the restaurant owner.
I feel like Square is uniquely positioned to provide 1-4 given their existing access to restaurants via Square POS and Square websites (Weebly).
So I suspect it stems from irrational hatred towards middleman services.
https://qz.com/1235417/bluegogo-and-didi-what-happens-when-y...
Got a link? I’ve never heard of this.
https://news.berkeley.edu/2018/05/31/those-four-wheeled-robo...
It's pilot-scale, relies on human labor, and has some obvious problems which would break down immediately at scale. Plus they're annoying to navigate around. But they do exist.
Also a process for new companies to emerge to put the now-struggling attempted-profitable public companies out of business as they seek a business model.
>It's not like anyone wants to go back to using a taxi.
To some extent. A city I normally fly into frequently, I usually grab a cab because it's just there even though Lyft is cheaper. If I were more price-sensitive I would probably wait for a Lyft but if pricing were similar, certainly not.
There also may be a 'change the world' sort of outcome, where consumers en masse like the product so much that they change their behaviour and lifestyles, even if it eventually turns out that they spend more overall than they might have before - if people stop owning cars, cease cooking at home, taking away revenue from supermarkets and auto manufacturers. Although this doesn't appear to hold up in the first analysis, second-order effects might start to appear - e.g. if consumers change their lifestyles, can you capture the value that they would have invested in owning a kitchen, or a garage and driveway?
This is all very speculative, I'm not claiming Uber etc can achieve this, just that different equilibria are possible - for instance, I gather that in some Chinese cities street food is incredibly good and cheap while density is high enough to make owning good cooking facilities a real pain.
You also get to call yourself an entrepreneur / founder / investor / whatever for your next thing.
The point of these kinds of businesses isn't to build skyscrapers that last 100 years, it's to build a pretty sandcastle, get paid and go do something else when the tide comes in.
It will be interesting to see if any of the big chains can force the delivery suppliers to allow multiple integrations, and Chipotle lets the lowest bidder deliver your food. Ultimately I think that's the next step. It doesn't make sense that there's a super special delivery driver who works for Pizza Hut. A better solution is to have multiple delivery providers delivering food and other goods for everyone. I think people would be surprised to find out how much generic delivery work there is to be done. Like every car garage has one or more parts delivery services. And these are mostly people in regular cars delivering your particular car's brake pads from a warehouse to the auto shop. Why can't Uber, or Door Dash, or whatever deliver that too?
On the other hand someone showing up at potentially hundreds of restaurants is hardly going to know each of their systems very well or be recognized on sight.
I think the primary benefit of having your own driver is that you get to put your branding on the car and the driver's uniform. It's not clear to me how much seeing that little "Pizza Hut" car topper impacts sales.
Restaurants can also make use of drivers they directly employ durning downtime to do other stuff like sweep up.
https://www.ups.com/us/en/services/knowledge-center/article....
Believe me I understand why it seems possible, but this is one of those cases where real world data doesn’t fit abstract models very well. One example is during peak times both the restaurant and it’s drivers get overwhelmed so preparation time is increasing. Another example is if their returning to the same location they can easily return empty insulated boxes, but that’s problematic if their doing pickup from 10+ restaurants a shift.
And this is the unwritten prelude to how Snowcrash happened and the mob got involved in food delivery. I can already envision Uncle Enzo capitalizing on his new venture.
But seriously. has anyone actually seen or know anyone who has used Caviar? Dorsey sold it to Doordash a while back for nearly half a billion in cash. Aloha is still the standard for POS systems in restaurants, and something called toast has become more an more popular from the restaurants I frequent that are still open and want to be mobile as they can't allow people to come in. It looked like an old Square thing with a card swiper on top. This is there website [1] apparently they've been around since 2012.
[1] https://techcrunch.com/2020/04/07/restaurant-management-plat...
Ouch. It says they're affiliated with Grubhub, so hopefully that's their support line in all of this.
This is interesting and suggests they're more a fee generation business model than a traditional fintech POS supplier and management/tech support one:
> As a result, fintech companies that help restaurants work better and depend on foot traffic are seeing less transaction volume.
Dominos has used its delivery as a differentiator several times in the past. (Heated bags, special cars with pizza ovens, time guarantees)
The service is now a part of "LoDel". LoDel seems to run a multitude of delivery services in different locations under different names. I don't know how this business model plays with restaurants, but it seems to be a bit of a halfway house between calling up your local pizza place for delivery or ordering through UberEats and the like.
Agreed.
> Hyper-local collaboration between restaurants in delivery that kicks out the app company “middle man” could become a thing. I’ve already seen this sort of thing work well in local markets that basically out-competed Uber etc by just getting their act together and hiring a few developers to build a basic app.
Also agree, and this model also applies to the Food supply. I hope we see a record breaking year in CSA subscriptions and community gardens are overflowing with plants this year. My local one has already had all of its plots taken.
You have the restaurant, which is physically optimized for in-person meals. Take-out on its own is already fairly clunky at many sit-down restaurants, there's no waiting area, pick up counter, no easy way to pick up at the curb, etc. Pickup is clearly not the focus of those physical spaces.
Then you have the integration between the app and the restaurant. This is the one thing about the entire flow that is actually integrated in a meaningful way, but still it's only at the single point in time of placing the order. If anything goes wrong, if there's a delay in preparing the food, or anything is sold out, or if they end up giving you the wrong person's order, there's always a runaround of whether you should talk to the delivery support or the restaurant itself. Seeing as at least something goes wrong with probably 1 in every 3 or 4 orders I do, this loss is a probably a really big deal for profitability as I am always getting refunded for something that was missing or went wrong or getting a $10 credit for an unexpected 3 hour delay.
And then you have the delivery handoff itself. I suspect this mostly works well in the suburbs, but living in an apartment building this is yet another opportunity for things to go wrong. I would prefer not to have to come downstairs outside the building to pick it up when I'm paying ~$20 for this delivery to my door, but very often the delivery people complain they can't find the building (it's clearly marked on google maps), or that there's no parking (I live in a very dense area, why are all these apps so car-centered in their delivery crew? Why can't I request someone on a bike that wouldn't have this problem?).
Basically, delivery could be done very efficiently, and profitably if we made some bigger changes. There should clearly be specific restaurants, maybe even some that have no seats at all and are just a pickup kitchen, that are optimized for efficient pick-up and marked as such. Cities need to change their street design to accomodate how many more deliveries are happening today, vs when these streets were designed many years ago (this is not just a problem for food, look how many rideshares drop people off in the middle of the road because there's no space to pull over to a curb, or how many Amazon or UPS trucks block streets and bike lanes because there are no dedicated 5-minute stopping zones).
It reminds me of Marc Andreeson's recent "It's time to build" essay. Our whole world is structured around how things used to work 40 years ago, and nothing significant can ever be changed. So we have to have these crazy, expensive hacks like Doordash to try to shoehorn in new services that people want, instead of making deeper adaptations as residents' needs and preferences change.
How do you reconcile this narrative with the fact that Grubhub turned a net profit every available year until 2019 per their SEC filings. [1] All told, they only took about 85 million between founding in 2004 and IPO in 2014, and they were already net profitable when they took the last 50.[2]
[1] https://investors.grubhub.com/investors/sec-filings/default....
For some reason, theres this streak on HN of people that think that VC's are just complete idiots, and are completely just pissing away money.
Like I said, I don't know. I don't think the questions can be dismissed just by assuming that VCs know what they are doing.
Edit: I went and looked at GrubHubs 2019 Q4 results [1]. They operated at a $30M loss. Most of the expenses were "operations" related. I'm not sure if that includes engineering, but I guess it doesn't.
[1] https://investors.grubhub.com/investors/press-releases/press...
2019: -18M
2018: +78M
2017: +99M
2016: +49M
2015: +38M
2014: +24M
2013: +7M
2012: +8M
2011: +15M
They are not. But they are banking on the general public to buy shares without scrutinizing the business sustainability and be left holding the bag.
Since IPO:
Shopify? $28 to $754
ServiceNow? $25 to $361
Alibaba? $93 to $199
Splunk? $36 to $149
DocuSign? $39 to $119
Teladoc? $28 to $188
Atlassian? $27 to $175
MongoDB? $30 to $194
Square? $12 to $73
Twilio? $26 to $187
Workday? $48 to $153
Veeva? $44 to $195
Zoom? $62 to $167
Facebook? $38 to $205
Palo Alto Networks? $53 to $215
Okta? $23 to $177
Wix? $17 to $166
Wayfair? $32 to $183
The Trade Desk? $27 to $292
Coupa? $29 to $205
RingCentral? $18 to $283
Zendesk? $15 to $73
Zscaler? $33 to $75
PayPal? $34 to $143
CyberArk? $30 to $96
Proofpoint? $13 to $115
Qualys? $13 to $101
Smartsheet? $19 to $52
JD.com? $20 to $47
Anaplan? $24 to $40
Zillow? $26 to $46
Roku? $26 to $117
Or more recently:
CrowdStrike? $58 to $76
Cloudflare? $18 to $27
Fastly? $24 to $36
Maybe they're holding one of the older bags.
Fortinet? $8 to $137
Tesla? $20 to $790
Salesforce? $4 to $169
Baidu? $8 to $95
Netflix? $1 to $438
Google? $50 to $1,349
Oh the horror.
Several broke regulated public utility or near utility functions like housing and transport.
Some are just scofflaws (uber, Airbnb)
Many are extra territorial trans national tax avoidance
These left and right columns distort the actual net effect on the economy.
Sure: my pension fund will be in all of them
Yes it’s good that they charge the customer more than they pay the driver, but that doesn’t translate into a “profitable transaction” from a business standpoint. If it takes $X millions in engineering costs to build and maintain an app required for that ride to have occurred then one needs to prorate that cost across each ride as a cost and so on. There are lots of examples of these creative “our transactions are profitable” claims like WeWork’s much ridiculed “Community Adjusted EBITDA” metric.
The fancier your metrics need to be to show you are “profitable” the bigger the red flag should be that all is not well in Oz.
Well sometimes they are, sometimes they aren't. Softbank Vision Fund justifies at least questioning some VC strategies.
Some of us think they're hypebeasts in search of a greater fool.
That's exactly the VC playbook isn't it? Subsidize the market until you achieve lock-in, then stop the subsidies.
Now the market has nowhere else to go but to pay almost whatever you want. A restaurant can't afford to not be on GrubHub. A diner doesn't even consider non-grubhub options due to habit.
But, yeah, you're right. The problem is, the harder you squeeze a lemon, the less juice is left in it. And in times like this, they're squeezing harder and they've nearly squozen their whole supply.
An apt definition of a number of the world's current issues, unfortunately. I've never heard it described that way before but I really like how simple the imagery is to grasp, thank you!
https://www.chicagobusiness.com/joe-cahill-business/restaura...
https://www.newyorker.com/culture/annals-of-gastronomy/are-d...
When I mentioned GrubHub and DoorDash to my wife when I say this article posted, I got a 30 minute rant about how much she hates them. She couldn't even give me a fixed fee she paid from these companies, she started listing off different fees and charges, but she said it was more than 20% per order. These companies have absolutely shot themselves in the foot with how they have treated their customers. What a lot of people really want is to be able to order online or through an app, that's the value these companies provide. For us we already had a WordPress website, so I paid a small fee to install the Woo Restaurant plugin to handle the online menu and ordering. It really wasn't much trouble to setup and it's been way less trouble than any of these middle men, and we get to continue to keep the profits.
I guess most of the restaurants I go to in SF don't actually have waiters any more, just runners. None of them are particularly well positioned to take advantage of how we eat food now, either. They are in expensive locations for foot traffic with large dinning rooms and small kitchens when you'd want just the opposite.
There was a 24hr local place that had things like marinated beef + rice for $30 ubereats total, which is exorbitant compared to my usual $12 meals. But I'd order there 2-4 times a week because of deliciousness, habit and convenience.
Grubhub has taken a profitable share of the market which makes sense.
Some people believe that new entrants are using private funding to subsidize the price of delivery to gain market share. By doing so, they are expanding the market beyond what the economics of the market support.
Those new entrants would argue that they are doing so because once they lock in customers and restaurants, they can raise their prices or lower their costs and turn a profit.
Where this all ends up is an interesting thought exercise , but it certainly isn't an easy question to answer.
Easier to pay a kid $7.50 per hour to drive around than to pay $12 per order to a third-party.
I delivered pizza for years before and during college. Looking back, I sometimes think the drivers were the ones who were subsidizing the big chains.
This was very early 2000s. I was paid about $6/hour and $0.70 per delivery plus tips which averaged $2 per delivery @ 3 deliveries per hour, 90% tax free as credit cards weren't used much then. I would walk home with $14 / hour, after taxes, which seemed like a great deal back then when the only other option for an introverted average looking guy who wasn't gonna make it as a waiter / bartender would have been $12/hour working awful data entry jobs or $8/hour doing retail.
It helped that gas was $1/gallon then, though within the next 8 years it would rise to almost $5/gallon.
But in those few years, I put on tons of miles of the worst kind of stop-and-go driving. I had a relatively decent 5 year old Honda, but after 4 years of delivering pies, it needed replacing. So essentially, I thought I was making $14/hour in a pretty cool job (driving around, listening to CDs, eating free pizza), but I'm guessing it was more like $10/hour after accounting for the wear and tear on my car.
I'd imagine most Uber, Lyft, Grub Hub, etc. drivers are all gonna see similar costs of doing business when they tally up their profits & losses over the lifetime of their car.
The shadow restaurants opening up to serve these markets that massively lower the quality of the food in shared terrible kitchens (most not zoned for that and with little to no safety equipment) but using the restaurant name anyway?
It's the whole thing end-to-end that is unsustainable.
https://twitter.com/susie_c/status/1255971900599046144
$1042 becomes $346.
Or as a recruiter recently pitched it to me, Travis Kalanicks next billion dollar opportunity!
https://www.google.com/amp/s/www.businessinsider.com/cloud-k...
Also this is anecdotal, but I’m way more likely to place a pickup order through GrubHub than any of the other apps (if they even offer that). I think it might have to do with the Yelp integration, and me associating that experience with in-person dining... so maybe I’m just naturally in a “find a place to physically go to” mode when browsing Yelp?
The takeout side of this business would obviously have no issues being profitable.
Easy. Take away the VC funding and see if anyone wants to try or can manage to start a similar company.
In most cases, these companies are just middlemen. Many folks do not see middlemen as "legitimate" businesses, even though the middlemen make money.
Hosts and parasites can each thrive. However only one can survive on its own. Ideally hosts would prefer to live free of parasites.
It should be expected that some consumers or producers will want to cut out the middlemen. We cannot reasonably expect everyone to appreciate those middlemen for the success they may have in taking a cut (and collecting data on consumer behaviour).
Yes, we saw this back in the dot com bust when similar delivery companies like Kozmo went under. These companies margins are thin with little room for error or ability to survive recessions.
Some like Instacart may work as a subsidiary of a larger business like Costco with other stable revenue streams, as a value-add. But not independently indefinitely. I hope Instacart, etc. have been searching for a buyer, it may be their only possible exit.
> Hyper-local collaboration between restaurants in delivery that kicks out the app company “middle man” could become a thing. I’ve already seen this sort of thing work well in local markets that basically out-competed Uber etc by just getting their act together and hiring a few developers to build a basic app.
It may be happening in Silicon Valley now. Some food service companies like Coupa Cafe have created their own apps and delivery services to cut out Uber Eats, etc. Not sure if they will merge their apps and delivery services though. Will be interesting to see.
Developing a new app each time sounds like a very expensive way to go. If that allows them to beat Uber then Uber is in trouble in this market. Because the next step is to create a service that any restaurant can join for fixed payment. Even with customization marginal cost for such thing should be quite low, surely lower than everybody building their own apps from scratch and maintaining them over time. And that's pretty much what delivery companies offer? So how developing your own app would be more effective than just using already developed app and adding a couple of menu items to it?
To what extent has America (and its followers) been led to believe these types of companies, who always seem to have a non-sensical name, and the narratives they construct ("fake markets") are the future of the American economy. While these middlemen may be a part of the future and play a role, are they receiving a disproportionate amount of attention relative to their true importance.
Luckily, I found out the restaurant does delivery by itself too and then it's free instead of the £7 I got charged by Uber so next time :)
I think this idea does apply to any model where the distribution/search costs are minimal i.e. Uber/Lyft. I think Lyft is a great business btw but their costs are totally wrong (i.e. they don't really need hundreds of software engineers milking the company dry).
There is the sweet spot. A wix/squarespace style service which offers businesses a boilerplate white-label app which they can use to offer delivery to local customers.
I guess that paying software developers $100,000+ each plus IT infrastructure plus worldwide marketing is just too expensive in comparison to a landline. Who would have guessed.
The endgame has always been to monopolize the market with aggressive marketing and huge discounts for customers, financed by VC. People are not supposed to order at restaurants directly but use delivery services so the restaurants need to fire their delivery drivers due to low demand. I'm happy that this hasn't happened so far and I hope all those services die fast.
And if servers' actual pay is increased enough to make up for not making tips, I'm guessing that back-of-the-house staff will start demanding higher pay, too, because the unfairness of the pay disparity would be a lot more apparent if servers and bartenders got better overall pay and known, stable, transparent pay.
And I'm guessing there are other problems that come into play that I don't even know about, since I haven't worked in a restaurant since I was a kid. But I'm guessing it all boils down to something akin to how car dealerships that price transparently can't make it, even though basically every consumer ostensibly wishes that car dealerships would price transparently, because it's too difficult to get your customer base to actually grok how this works when presented with it as a real option.
It worked really well until rappi(Latam equivalent of doordash) came in with a billion of dollars from softbank.
https://en.wikipedia.org/wiki/ChowNow
The order is placed on the SaaS site, but the restaurant does everything from then on.
How many of the mom-and-pop places provide delivery using family/teenagers that get paid less than minimum wage?
On whole, these places don't rely on sub-minimum wage help any more than other small businesses do.
For the UberEat, Foodora, deliveroo, ... style delivery coordinators it is tough - their game is to cover each and every restaurant they can get to offer wide variety on offerings, but little optimisation potential in the delivery routes. Playing for the endgame where there is no alternative and they can raise prices.
Something that I tend to think about, coming from working for a manufacturing business, is that quality problems are often rooted in manufacturability, which is rooted in design. A unique meal, that is made by hand from a bunch of variable ingredients, is a design waiting for scale-up problems, unless you change the design to support higher volume production methods.
People figured this out a long time ago, how to manufacture foods that could be scaled way up, and even delivered. A supermarket is such a solution. The food might be less exciting, but the quality level (i.e., reproducibility) is very high.
The industry is trying to solve a design problem with delivery technology.
That entire value proposition is predicated on offering the customers a good experience and offering the restaurant staff a good experience with no hassles.
But as you say, that's not what the VCs want - they want to lock the restaurants in and profit as a middleman.
Only that this is not sexy for VCs because that's something everybody could do. Although Shopify is also something everybody can do and already did very often.
I'm pretty sure the places that do their own delivery have to cut corners on ingredients to be able to do it while matching the prices of their take-out only peers. that is, the delivery fee they add to the order doesn't actually cover the cost of delivery, so they make it up by cutting costs elsewhere. when the cost of delivery is transparent, most people just aren't willing to pay what it takes to employ even the most downtrodden citizens of a developed country to drive around delivering food.
We surely have a lot of data at scale now to show uber eats and co loose a ton of money, but I'm not conviced the local restaurant paying a salary to a driver etc were many a lot of money either? I really dont know
And yes, they were making money doing it. If they weren't, they would just stop doing it. These sales were also far more profitable than UberEats or whatever...which is kind of obvious given that they weren't paying their drivers a 30% cut. The real value of these companies is the marketing (which is why the companies that have been doing this for years, like Just Eat, didn't provide delivery at all until recently).
...but yeah, people really underestimate how bad a deal some of these places are for small businesses. Most large restaurants (i.e. McDonalds on UberEats) are actually paid to be on the service. The small businesses get reamed (Just Eat is opening dark kitchens, whenever they see someone making money...they move in and kill the business).
I am not at all against delivery drivers getting their due, but the whole tipping culture is a pressure I can just avoid if I don't have things delivered which I can go get myself. I envy the countries which lack this automatic tipping culture.
And the cause there, as presented by Wikipedia[1] is fascinating to contemplate. The abnormally high tax rate (especially compared to the services provided) increases the demand for corruption to avoid taxation. Taxation avoided reduces money available for bureaucrat salaries, to where they are almost reliant on the bribery system to make ends meet. And hence the pressure on line staff to kick back money up -- a promotion would separate you from direct contact with the public and represent a loss of income that must be replaced somehow. It's kind of a weird Laffer curve phenomenon where higher tax rates yields less revenue.
[1]: https://en.wikipedia.org/wiki/Corruption_in_India#Factors_co...
And they often do.
Coming from a poorer country, mandatory tipping is such a strange concept.
Apart from that, I'm a typical engineer in FAANG, and I feel it's expensive... So I wonder who find delivery app cheap? A millionaire??
Back in my country, I ate out every single meal (even when I was a college student). Delivery app works well too because the price is sensible.
if you're in an unfamiliar situation, you can always just ask what a typical tip is. service staff at a fancy establishment will probably try to evade the question, but otherwise the person will usually answer honestly.
if you really just want to "set it and forget it", there's virtually no situation where someone would hold a 20% tip against you.
Great strategy if you have money burning a hole in your pocket and want to subsidize businesses that don't pay a living wage.
It's with this money spending culture that people in the US end up in the streets when they miss a single paycheck.
if you're this concerned about saving money, you probably shouldn't be ordering food for delivery or dining out in the first place.
I really don't get people who are against tipping people in low-paid service jobs. (Even if they're making at least minimum wage.) If you're paid more than they are, and their service is providing you with value, show them some appreciation!
as a random anecdote, I was talking to the ups delivery guy for my building the other day, and he said he's been making more money in tips than from his actual paycheck during the present crisis.
In foreign land: delivery person gets $10
In america: service pays delivery person $6. Client must device whether to give delivery person $3-$5.
Big uncertainty about which situations call for a tip, and which don’t, and how much.
In restaurants you can at least say “I pay to reward good service”. But with delivery, I am getting an undifferentiated bag of food at my door. Nothing differentiates service quality level. Deciding what amount to pay absent any interaction is confusing. And why is it based on a percentage of food?
Your argument is based in the assumption the worker has little pay. In america this is true, the worker gets little because tips are expected to make up for it.
In other countries, no tips are expected, so salary makes up for it.
It's always a loss for a business from my point of view.
Tipping is dumb. It being percentage based is silly. I have to "appreciate" the service more because... I ordered a more expensive bottle of wine? C'mon, that's silly. It's also crazy arbitrary. We don't tip fast food workers, but we do tip people at Starbucks? I recently had someone come out and fix my washer. I had no idea whether or not to tip.
I think of that Mad Men scene when these conversations about "appreciation" come up.
Peggy: "you never say 'Thank you'!" Don: "That's what the money was for!"
I'm a simple man, but I like service exchanges being what they say on the tin. I give you money. You give me service. No hidden societal expectations that involve more out-of-band funding.
So far, it seems that only tightly integrated operations with highly standardized food products for which the source/freshness/ripeness of ingredients is not an issue (e.g., boxed pizzas made from frozen manufactured components) have been able to make local on-demand delivery sustainable at a national or global scale.
The only "exceptions" would appear to be FreshDirect (founded by an owner of NYC's Fairway Market) and Peapod (operated by Giant supermarkets)... BUT both have grown more slowly and deliberately than the latest crop of startups, while maintaining tight/integrated control over all aspects of operations. Moreover, neither allows consumers to order on-demand -- consumers have to choose a predefined delivery window in advance, sometimes days in advance.[d]
[a] https://en.wikipedia.org/wiki/Kozmo.com
[b] https://en.wikipedia.org/wiki/Webvan
[c] https://en.wikipedia.org/wiki/Urbanfetch
[d] https://nypost.com/2020/03/15/nyc-freshdirect-delivery-times...
Whether these services can become sustainable businesses or not, we should feel grateful for their current existence -- and for the willingness of their backers to subsidize the cost of delivering food to our door.
These services and their backers deserve a big THANK YOU!
Back to the topic here. Fresh Direct has the most experience and has the best customer experience, so I really really hope they don't go out of business or get bought by Amazon!
I can't imagine how hard it is for services like Instacart to handle. Same chain of grocery stores a few miles away from each other often have wildly different items in or out of stock on the same day.
I do mostly just go into one store. But e.g. today went into a small meat farm store and they had nothing I was looking for. Bought a couple of different things that will be fine.
But TBH I used grocery delivery previously once because of a broken foot. And missing/poorly substituted items were a pain and often led to me having to go to the store personally anyway.
In 10 years of using FD, only during coronavirus have items been missing from my order. And not many.
Compare to InstaCart, which has to go the opposite direction: https://tech.instacart.com/predicting-real-time-availability...
Sounds like a nightmare to me. And stores may not want to "plugin" their own systems because at that point, they're just commoditized with already razor thin margins.
The one downside to FreshDirect? It's very expensive. I'm lucky enough to be relatively price insensitive, but recently became a big fan of Trader Joe's. Obviously they're known for being economical, but I'm astounded how much cheaper it is. Even Whole Foods and the like.
Cooking 16 oz of cruciferous veggies and an ~8oz piece of meat is my standard lunch. At FD it's 10+ dollars (depending on the level of prep you want on the veggies). At TJ and grocery stores, even in NY, you can hit sub $5, easy.
Of course, the delivery itself is a huge convenience. But is it a 100% premium? I wonder.
When you have to intercept them downstairs because you're in a restricted-entry tower, that's crucial. D:
I can't afford to get $20-$30 delivery food every week, so I've moved to doing takeout instead.
I think restaurants/delivery companies are having a hard time adapting to all of the new (different type of) demand while at the same time having a huge cut in profits.
In no real world can <$5 on-demand delivery work out unless you have a very high volume of order and can pool the delivery.
Of course we didn't pay it did takeout instead. I feel bad because there's a tier of service workers that I'm not supporting anymore, but marking up ~100% prices us out.
I don't have a car, otherwise I'd just hit the drive through myself.
I think the reason it has worked for pizza, is that pizza always had that extra cost baked into the product itself.
Also, IME, the order accuracy is vastly superior. In fact, a few people ordered lunch to our workplace yesterday, and they didn't have one of the non-meat items I ordered (intentionally), so they replaced it with a meat item, without even trying to contact us first. Just insane to think someone thought that was an acceptable substitute, let alone without even confirming.
Seems to me like this would be a very hard business to scale quickly. Consumers don't want to pay a delivery charge and don't care about the middle man - their relationship is with the restaurant, not uberGrubCart. The restaurants want to control their costs too... so feels like the only way this whole delivery business can work is if it's a third party, white-label service serving local restaurants, getting paid by the restaurants, and it is then up to the restaurants to figure out how to burry the costs into their pricing so the consumer doesn't see it.
Great idea though. If I'm buying from a restaurant, I want them in control of the experience. Even for pizza.
If you have the drivers work for an aggregator, it gets much easier. That doesn't have to be a for-profit corporation though, it could be restaurants getting together and cooperating.
That could work, and would certainly shift the power towards restaurants.
But a local, profitable delivery service wouldn't need to be a VC-funded business. It could start out very small, serving just a handful of restaurants in a single neighborhood. If it caught on, other restaurants could join in and it would grow.
It wouldn't need "buzz" either, since it would only need to market itself to restaurants, not to consumers (who would deal directly with the restaurant in the proposed scenario).
Which might not be sexy, might not make you rich overnight if ever, but gosh darn it might send the next X generations of your family to college debt free and put a pool in the backyard. We spend so much time in this world chasing financial engineering rather than focusing on business fundamentals.
* Consumers want to buy from brands/sellers directly instead of through amazon
* Consumers want to buy from food producers directly instead of through a supermarket
* Consumers want to buy movies directly instead of deal with Netflix
* Consumers want to buy apps directly from developers instead of dealing with Apple/Google
These are all non-white-label middle-men.
These food delivery services are providing a marketplace & all the logistics. The restaurants don't have to do anything except setup the menus. They provide convenience for both restaurant and customers.
I really don't understand all the hate these services are getting here.
I'm not hating them at all - in fact, I think I've only used them twice and I really don't have an opinion...In fact, having not used them extensively, I'm looking at them with the eyes of an outsider...
Where I disagree with you above is the question of value vs business model. In each of the examples above, there is value being added and a business model that works. In the case of these delivery services - there is value being added, but the business model seems off and that's what's causing it to not be profitable.
Maybe if UberGrubCart let users order delivery from famous restaurants in another state that might be a real value add - but in a hyperlocal market like restaurants they have an uphill battle to fight.
Food delivery really doesn't provide an immense benefit to consumers, and restaurants don't get enough real business through it to justify its cost.
On one hand, if the food is too local, people will just say "I'll just pick it up myself and save the ridiculous fee." If it's too far away, the food will take forever and will likely be cold anyway. This is why pizza delivery was always local - it is one of the few places where delivery makes sense, and the fees were low, like 1 buck. So there's a small range where it's just far enough to be inconvenient but close enough that the food is still relatively good, which in most cases doesn't exist.
On top of that, you need to pay money to the driver. It's just a whole lot of overhead for very little gain.
* Restaurant wants to get paid as much as possible
* Platform wants to get paid as much as possible
* Customer wants to pay as little as possible
And the customer's baseline is "pay for the cost of the food only, and 100% goes to the restaurant" like an old fashioned, called-in take-out order. This allows (at baseline) $0 for courier or platform, and every dollar increase in price (for courier & platform) seems unfair, i.e. "why does it cost more." So some platforms hide the extra cost & extract it from the restaurant, which upsets the restaurant, and often upsets the customer when they find out.
Really I see no way "food delivered hot to your door from all over the city, selected & ordered with no human interaction" (and lets not forget "with returns, customer service, refunds" etc.!) can be an "inexpensive" service, unless the costs of the courier or the food itself go way down. Restaurants already charge $14 for a hamburger & $7 for fries, that doesn't leave a lot of wiggle room.
I'm very curious to see how it all shakes out, because this covid situation (which changed delivery from "luxury" to "necessity") is going to be going on for the next 12mo at least.
Of the few places in my neighborhood still open for to go, the line is so long that if you order in advance my food is cold before I can pick it up.
We largely aren't ordering food at this point and just cooking at home. I did order a pizza the other day and it was really good and delivered on time piping hot, but it was a time of low demand.
A few times the estimate was off and from the status/tracking page, it looked like the driver was making another delivery before mine, but that didn't delay my order more than 10 minutes or so.
but, at the same time, i live in a huge city (12mi people) and i live downtown.
The current system has balanced this in a way that's left a lot of restaurants feeling like they're being charged usurious amounts, yet the delivery company still isn't making money -- and customers who notice that that $16 pulled pork plate at Armadillo Willy's is a $19 plate from Doordash not including any added delivery or "service" fees may be less enthused about making those orders regular things if the restaurant's within comfortable pickup range.
The night before you all vote on the restaurant to order from and the time, then everyone orders their own favorite dish, then the restaurant delivers it to one of the houses.
Benefits: Cheap food! Meet your neighbors!
Downsides: Cheap food... Meet your neighbors...
EDIT: some prior art https://www.restaurantdive.com/news/uber-eats-launches-group...
https://www.wedeliverdouglascounty.com/
~100 restaurants teamed up, have salaried drivers, and an app. I've been told it works well by locals.
Most importantly, I've never heard anyone using it, so it wasn't done right.
I'm confused about what you mean here.
> Also it seems that the instigator is picking up the bill.
Correct. The model rewards people for piggybacking because it incentivizes them to choose a restaurant that might not have been their first choice.
To avoid being the "instigator", you can just always choose to piggyback. It's always an option in my city.
> I wouldn't want to bicker with my neighbors over them forgetting to pay.
I also don't understand this, but perhaps you meant it in a context other than UberEats.
> Most importantly, I've never heard anyone using it, so it wasn't done right.
Many people won't realize they're using it. It shows up like a delivery discount: "Order in the next five minutes and pay $0 for delivery" or something like that. Everyone UberEats user I know uses it -- some exclusively. We never talk about it though, this is just what I've observed when watching them order.
We're getting takeout to support our local businesses.
The delivery companies take such a big cut that the local business barely breaks even or loses money on the deal. Most of them have asked people to call in directly and pick up if they possibly can, and some even have re-employed their workers as delivery drivers for direct call-ins.
I go out with my mask and goggles and pick it up. There is so little traffic it doesn't even matter. I get there super quick and park right in front. Then I stand in line with all the poor Grubhub/Ubereats contractors who I know aren't getting a great deal either and we all get our food. I usually let them cut me in line because I know their tip may depend on their speed.
- Uber Eats
- DoorDash
- SkipTheDishes
- Foodora
- Fantuan
- HungryEats
Foodora just shut down two days ago: https://www.globenewswire.com/news-release/2020/04/27/202270...
And there were at least two more that were previously available but seem to have been acquired: Just Eat (by SkipTheDishes), and Nomme (by DoorDash).
It's ridiculous how many companies are fighting over a market that doesn't even seem to be close to profitable for anyone.
Add that to all of the general "food delivery is a fool's game" arguments, and none of this should be a surprise to anyone.
If you discount something but you're still making money, and your discount gets more people to buy the product, then you can make more money than you would have without the discount.
That's how it can make sense.
Also the employees will eventually want more benefits higher pay etc as the company grows.
Companies whose efficiency relies on humans can not be that profitable no matter how much money you throw at them. Computers are more efficient than people. Simply using computers to coordinate people isn’t as efficient as no people.
You see hyper growth and large profits specifically from tech companies whose product could run for awhile if every human left.
Food delivery would exist for 0 time if every human left.
Meanwhile they employ an army of sales reps, hyping their services to restaurants. They downplay the commission rates and emphasize that the restaurant will be let behind because they are not represented online while everybody else is.
Luckily restaurants started to notice that being online doesn't really matter for a local business. Put your menu up and a phone number next to it.
The prices as listed in the app was definitely more than the in store price and there was admin fee and a 10% driver tip (not mandatory).
A few problems with instacart and other deliveries for me:
- uncertain delivery times. Even when the shopper marks the order as completed it can take up to an hour to get to my door. It seems they bundle orders but this isn't clear and makes me worry about cold or hot food
- inaccurate orders. I have gotten 3 extra ranch dressings which I have never ordered!
- constant changes to orders due to items being out of stock. Not instacarts fault but it is still a bad user experience
- I am tempted to leave a poor review of a shopper but then I think they know where I live! Less than ideal.
Overall I would rather interface directly with the stores and restaurants. There are just too many things which can't be generalized across a platform. New restaurant discovery isn't something I need either.
And being a member of a coop does not require expertise in the core competence of the coop itself. It requires understanding that the existence of the coop is beneficial for you. Heck, I am a member of a major food market coop, and I have zero knowledge (and interest) of food supply chain management.
I guess I was never much of a restaurant guy before all this stay-at-home, and ever since stay-at-home, I've gotten food delivered exactly zero times. It's not even something I'd consider, given that there is a global pandemic and I have no idea whether anyone in the pipeline between cook and driver is sick. Food delivery is the business I'd have predicted would go to 0% in a viral outbreak, but here we are with it flourishing. Totally astounding. Maybe I'm the only one surprised, I don't know.
And as for the other services, from the article it sounds like a lot of the issues are directly related to the pandemic. I think there will be a golden period for them after the pandemic, or perhaps sooner. I would have never used a grocery delivery service before -- the idea of someone choosing & touching my food is unappealing to me. But now that I've used it several times, I am loving it and want to continue using it.
[1] https://www.foxbusiness.com/lifestyle/coronavirus-instacart-...
How long could the product run in theory if every human left? If it’s days/weeks then you have a tech company. If it’s not you don’t.
True tech companies should have a high GAAP margin.
The markets will demonstrate how profitable these companies are in the long term I suppose.
Anecdotally, I've seen more people learning how to prepare food at home, since they have much more time. Personally I've dived into bread making. We're also regularly preparing large dinners and freezing portions.
Why is it bread for everyone? Can't even buy flour these days to save your life...
Sorry to hear about your flour situation. Flour is much easier to get for us now. Most stores are restocked in this area (south bay). Even Costco has their mega bags back in stock.
Look to Dominos as a model - I've been following their reinvention as a "tech company". Dominos corporate doesn't own many stores. Local affiliates do that. What Dominos corporate does is half logistics (Getting shipments of pizza products to stores, negotiating bulk rates) and half tech (Running the ordering systems, website, and marketing apparatus).
In some ways, they've long dealt with the "uber" model problems of employee/contractor divide. Stores are mostly owned not by corporate but by small local companies. Those small companies do actually employ their workers, but don't have the same problems that giant business do, because they are "small businesses". In return they are a lot more autonomous than Uber city-managers, and the "corporate" entity takes a smaller cut of the profits than Uber does.
Grocery delivery is, of course, easier because there is no strict time limit usually and the orders can be pooled together.
Not sure how food-delivery works in the USA, but I'd think the low density, car-focused infrastructure might make it less competitive compared to cyclist/scooter deliveries elsewhere.
If there's a problem with things it's the model of the delivery apps and sharing economy, not the economics of food delivery itself.
It is a far better experience than calling local taxi companies. The same reason people use Uber.
Edit: the tiffin containers are made of metal and therefore are reusable instead of all the Styrofoam and plastic that ends up in the landfill for US food delivery so they seem far more environmental too.
But when the office buildings that should allow you to deliver 100+ meals to a single address are empty (everyone is working from home), the logistical hurdle is insurmountable.
Of course the hurdle of collecting tiffins in the first place from New Yorkers who are used to throwing away plastic is also daunting.
Getting restaurant food delivered is a waste of money compared to getting bulk food delivered from supermarkets, so those who order it are probably not very price sensitive, and thus simply raising prices until the company is profitable should work without losing so much customers that economies of scale are lost, assuming there are no money-losing competitors.
One model I do think is interesting is something like Goldbelly. It's not instant food, but you can get food from any participating restaurant in the nation and have it mailed to you and you then cook/reheat it. That eliminates so much overhead, and you're using an existing logistics provider. Obviously that isn't quite the same market, but it's similar and seems much more sustainable.
Buying GrubHub may make Uber Eats profitable in places where GrubHub is their main competition.
It was... OK. Invariably there were items missing and substitutions I didn't care for. But it got me most of my groceries and it wasn't really hard for me to go to the store to pickup another item or two.
But I haven't used them since I was off crutches that time.
Contrast gig economy (I cannot believe I am using that term) workers of today with milk delivery workers of the past. What's different? A schedule? A subscription?
You're blaming the implementation because fundamentally the service makes sense.
Let's say I am a restaurant owner. I want to take orders online. I don't know anything about payment processing, making a website, etc. Grubhub makes a ton of sense to me because they handle all of that stuff, as long as the price is right.
Maybe it's impossible to offer such a service profitably. But that seems weird to me.
Honestly I just don't see why would anyone spend the money, the guilt trip (from not tipping), and the bad food.
For restaurants that already offer delivery (pizza places), avoiding the food-delivery middleman seems like a win?
What do these companies spend so much money on that they struggle to break even?
They don't pay their drivers (maybe a few dollars an hour?), provie any benefits, pay rent.
Look through my fees, I have paid doordash about $100 over the course of 17 deliveries, and $120 in tips to drivers. That's a lot of money for doordash to basically route my order to a restaurant and driver.
What exactly is the overhead? Maybe it's because I work for a small company where five developers have been able to compete with teams with 100 plus engineers, but I don't see these apps as super complicated or requiring a huge engineering team.
The fact that delivery business is having trouble in the most fecund business state is a testament to the (non) viability of the business as structured.
In other places food delivery is assisted not by expensive four-wheeled vehicles but by cheap two and three-wheelers.
Food delivery doesn't have any laws you can break in order to make your service more profitable.
Take Uber, for example.
You cannot, in all seriousness, charge a piss poor amount for a 30-minute taxi ride, and then take a cut from it, and expect people to somehow be okay with it. It doesn't work and it's disrespectful to people involved. It ruins the economy and no amount of handwavyness about market forces will make things better.
The same thing here applies to their food delivery businesses.
There is a reason why what they are doing is illegal - predatory pricing. But they think they are too big to fail.
You can innovate and VC all you want, but it the demand decreases, so does the revenue.
How much could that spike be attributed to Trump-bucks arriving in people's bank accounts?
It's just a system where everyone loses.
Nah, I’m sure there’s enough money in this for it to be worth an entire publicly-traded corporation with stockholders to keep happy and immense amounts of VC to pay back.
Oh, no, they can’t? Well. Bye, I guess. Good luck collapsing the company behind you to avoid being on the hook for all that VC you blew through, guys! Enjoy your market correction.